Leaders for Manufacturing 15.

066J
Summer 2003 S. C. Graves

Mid Term Solution

Mr. Smiths Garden

FORMULATION

Decision variables (5 points): there are decision variables for vegetables planted, for
tomatoes sold, for tomatoes frozen, for soup made and sold. All variables are non
negative.

Define
X1, X2, X3, X4, X5, X6 number of plants to grow, for beefsteak tomato, better boy
tomato, green pepper, respectively. (units are number of plants)

T7, T8, T20 pounds of tomatoes to sell in weeks 7, 8, 20.

F7, F8, F20 - pounds of tomatoes to freeze in weeks 7, 8, 20.

S9, S8, S16 pounds of soup to make in week 9, 10, 16.

Y pounds of soup to sell.

Constraints (20 points): there are resource constraints, balance constraints for tomatoes,
and supply constraints for soup.

Resource constraints

There are only 2000 square feet for planting:

9 X1 + 8 X2 + + 3 X6 2000.

There are only 25 hours of labor each week:

0.1 X1 + 0.1 X2 + + 0.05 X6 25.

Tomato balance constraints

In each week, tomatoes produced equals tomatoes consumed by Mr. Smith, or frozen, or
sold.

1.5 X3 Ti Fi = 10 for i = 7, 8, 9
2 X2 + 1.5 X3 Ti Fi = 10 for i = 10
2 X1 + 2 X2 + 1.5 X3 Ti Fi = 10 for i = 11, 12 16
2 X1 + 2 X2 Ti Fi = 10 for i = 17

1 Mid Term Solution

 2 X1 Ti Fi = 10 for i = 18, 19, 20

There is also a demand constraint as Mr. Smith needs 250 pounds of frozen tomatoes.

F7 + F8 + +F20 250.

Soup supply constraints

Each week the amount of soup made is limited by the ingredients, that need be supplied
according to the recipe. One can deduce that soup can only be made in weeks 9, 10,
16, due to the requirement to use fresh ingredients. The amount made cannot exceed the
available supply of ingredients. Since one eggplant bush yields one pound of vegetable
each week and one pound of eggplant is needed to produce four pounds of soup, then one
eggplant bush is needed for every four pounds of soup that we make. Similarly we need
one zucchini plant to make twelve pounds of soup, and one green pepper plant for every
two pounds of soup we make.

4 X4 Si 0
12 X5 Si 0 for i = 9, 10, 16.
2 X6 Si 0

We need 200 pounds of soup for winter and can sell up to 2000 pounds of soup:

S9 + S10 + + S16 Y 200,

and Y 2000.

Objective function (10 points): The objective is to maximize revenue net of operating
costs.

Mr. Smith gets revenue from selling tomatoes according to the declining price schedule,
and from selling soup a $5 per pound:

Revenue($) = 4 T7 + + 3.2 T11 + + 2.2 T16 + 1.4 T20 + 5 Y

Mr. Smith has a labor cost for each plant. For instance, for each Beefsteak plant, he
requires 0.1 hours of labor each week for 20 weeks, at a cost of $8 per hour. Thus the
labor cost is $16 per Beefsteak plant for the season.

Cost($) = 16 X1 + 16 X2 + 24 X3 + 8 X4 + 8 X5 + 8 X6

The objective is to maximize Revenue Cost.

2 Mid Term Solution

SOLUTION
(15 points)
The optimal solution is given by

Number of plants
Beefsteak tomato 67.5
Better Boy tomato 19.3
Rutgers tomato 6.7
Eggplant 68.8
Zucchini 22.9
Green Pepper 137.5

Tomatoes sold Tomatoes frozen Soup Made

Week 7
Week 8
Week 9 275
Week 10 38.5 275
Week 11 173.5 275
Week 12 173.5 275
Week13 173.5 275
Week 14 173.5 275
Week 15 173.5 275
Week 16 173.5 275
Week 17 163.5
Week 18 125
Week 19 125
Week 20 125

At the end of the season 2000 pounds of soup are sold. The net revenue to Mr. Smith
from this plan is $10112.83.

3 Mid Term Solution

Extra Labor (10 points): Mr. Smith should not seek extra labor as the optimal plan only
requires 21 hours now, and there is five hours of slack. The shadow price of additional
labor is zero.

More Space (15 points): As shown below, the shadow price for more space is $3.40 per
square foot. This shadow price is valid for an increase of 309 square feet. Thus, you cant
answer the question without re-running the solver.

Final Shadow Constraint Allowable Allowable

Cell Name Value Price R.H. Side Increase Decrease
$C$9 garden area 2000 3.40 2000 309.17 154.17

When one re-runs the problem with 310 more square feet of space (total equals 2310), the
shadow price for space drops to $3.20 per square foot, and this is valid between 309 and
367 additional square feet.

Final Shadow Constraint Allowable Allowable

Cell Name Value Price R.H. Side Increase Decrease
$C$9 garden area 2310 3.2 2310 57.08 0.83

When one re-runs the problem with 368 more square feet of space, the shadow price
drops to zero, as the space constraint is no longer binding; the solution remains
unchanged for any amount of additional space beyond 368 square feet.

With 367 more square feet of space, the profit is $11349.33, an increase of $1236.67.
This is the most that Mr. Smith would pay for 500 square feet of space. Indeed, he would
be willing to pay as much as $3.40 per square foot for the first 309 square feet, and then
$3.20 per square feet for the next 58 square feet. But he would not pay anything for
incremental space beyond 367 square feet.

He will use the additional land to modify the mix of Beefsteak tomatoes and Better Boy
tomatoes. The number of Rutgers tomatoes, eggplant, zucchini and green peppers remain
the same. The table below shows how the plant mix changes as the size of the garden
expands.

2000 square feet 2309 square feet 2367 square feet

Beef Steak 67.5 67.5 125.4
Better Boy 19.3 57.9 0

As one initially adds space, the extra space is used to plant more Better Boy tomatoes,
and ultimately to sell more tomatoes. This is because the revenue per square foot for
Better Boy is higher than for Beef steak (once we have satisfied the requirement for
frozen tomatoes).

However, after we add 309 square feet, then the labor constraint is binding. As we add
additional space, we actually reduce the number of Better Boy plants and increase the
number of Beef Steak plants. For each additional square foot we substitute one Beef

4 Mid Term Solution

Steak for one Better Boy, since each require the same amount of labor but Beef steak
requires one more square foot than Better Boy. Profit goes up since a single Beef Steak
plant generates more revenue than a single Better Boy plant. This substitution stops after
we add 58 more square feet since the number of Better Boy plants is now zero.

Tomato Purchases (15 points): The following table shows the non-zero reduced costs for
the decision variable for selling tomatoes for the optimal solution. In all of the other
weeks the reduced cost is zero.

Final Reduced Objective Allowable Allowable

Cell Name Value Cost Coefficient Increase Decrease
$N$17 week 9 sell tom 0.00 -0.87 3.60 0.87 1E+30
$N$27 week 19 sell tom 0.00 -0.05 1.60 0.05 1E+30
$N$28 week 20 sell tom 0.00 -0.25 1.40 0.25 1E+30

These reduced costs suggest that Mr. Smith might want to buy tomatoes in weeks 9, 19,
and 20. We can also look at the shadow prices for the tomato balance constraints, which
indicate the impact on profit from having to supply one more pound of tomatoes. These
shadow prices exceed the market price for tomatoes in weeks 9, 19 and 20, which
suggests that Mr. Smith would want to buy tomatoes in these weeks.

To confirm this intuition, we can re-solve the LP where we add a set of variables to
denote buying tomatoes in each week. The tomato balance constraints are now modified,
e.g., for weeks 11, 1216:

2 X1 + 2 X2 + 1.5 X3 Ti Fi + Bi = 10 for i = 11, 12 16

where Bi is the amount bought in week i.

The garden plan is now

green
beefsteak betterboy rutgers eggplant zucchini pepper
0 101.04 0 68.75 22.92 137.5

With a profit of 10187.

Furthermore, Mr Smith buys 10 pounds of tomatoes in weeks 7, 8, 9, 18, and 19, and then
buys 260 pounds in week 20. It is cheaper for Mr. Smith to buy tomatoes in these weeks,
rather than plant Rutgers plants for the early weeks or plant Beef Steaks for the last
weeks of the season.

Soup Sale (10 points) From the sensitivity report, we get the reduced cost for the upper
bound on the amount of soup sold:

Final Reduced Objective Allowable Allowable

Cell Name Value Cost Coefficient Increase Decrease

5 Mid Term Solution

$L$6 soup sold 2000.00 2.33 5.00 1E+30 2.33

This tells us that if we could sell an incremental pound of soup for $5, then our total
profit increases by $2.33. So if we were to sell the incremental pound of soup for $3,
then our profit increases by $0.33. So the proposed contract has potential to be of
interest.

The above sensitivity information does not tell us the range over which the reduced cost
is valid. So we need to re-solve the LP. When we do, we get a new garden plan:

green
beefsteak betterboy rutgers eggplant zucchini pepper
67.5 5.73 6.67 75 25 150

With a profit of $10177.83. We take the contract for 200 additional pounds of soup.
Consequently we increase the amount of the garden used for eggplant, zucchini, and
green peppers so as to make 200 more pounds of soup. We make 300 pounds of soup in
each week from week 9 to week 16.

We still plant 67.5 Beef Steak and 6.67 Rutgers so as to satisfy Mr. Smiths
requirements. We reduce the number of Better Boy plants, and thus reduce the amount of
tomatoes that we sell.

6 Mid Term Solution